<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission file number 0-16508
USA REAL ESTATE INVESTMENT TRUST
(Exact Name of Registrant as specified in its Charter)
California 68-0109347
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
455 University Avenue, Suite 100, Sacramento, California 95825
(Address of registrant's principal executive offices) (Zip Code)
(916) 564-4532
(Registrant's telephone number, including area code)
COMMONWEALTH EQUITY TRUST USA
(Former name)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
/ X/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the latest practical date.
Certificates of Beneficial Interest Outstanding at June 30, 1995
par value one dollar per share 4,153,469
IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THIS FORM 10-Q
IS BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP EMEMPTION
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USA REAL ESTATE INVESTMENT TRUST
Index
Part I. Financial Information
Balance Sheets - June 30, 1995 and
December 31, 1994 ................................. 3
Statements of Income - For the Three Months
Ended June 30, 1995 and 1994 ...................... 4
Statements of Income - For the Six Months
Ended June 30, 1995 and 1994 ...................... 5
Statements of Cash Flows - For the Six
Months Ended June 30, 1995 and 1994 ............... 6
Notes to Financial Statements ....................... 7
Management's Discussion and Analysis of the
Financial Condition and Results of Operations ..... 8
Part II. Other Information ................................... 9
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PART I. FINANCIAL INFORMATION
USA REAL ESTATE INVESTMENT TRUST
Balance Sheets
June 30, December 31,
1995 1994
(Unaudited) (Audited)
----------- -----------
Assets
Investments:
Rental properties, less accumulated
depreciation of $1,962,472 at June 30,
1995 and $1,903,027 at December 31, 1994
and valuation allowances of $5,713,000
at June 30, 1995 and $6,051,000 at
December 31, 1994 $ 20,929,235 $ 23,983,095
Notes receivable 894,293 966,047
---------- -----------
21,823,528 24,949,142
Cash 2,240,140 378,411
Other assets 530,368 596,319
----------- -----------
Total assets $ 24,594,036 $ 25,923,872
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Long-term notes payable $ 2,293,488 $ 3,344,907
Accounts payable and accrued expenses 87,521 133,003
Lease deposits 70,371 73,658
----------- -----------
Total liabilities 2,451,380 3,551,568
----------- -----------
Shareholders' Equity:
Shares of beneficial interest, par value
$1 a share; authorized 7,500,000 shares;
4,153,469 shares outstanding at June 30,
1995 and 4,177,723 at December 31, 1994 $ 4,153,469 $ 4,177,723
Additional paid-in capital 30,487,172 30,535,678
Distributions in excess of cumulative
net income (12,497,985) (12,341,097)
----------- -----------
Total shareholders' equity 22,142,656 22,372,304
----------- -----------
Total liabilities and shareholders' equity $ 24,594,036 $ 25,923,872
=========== ===========
See accompanying notes to financial statements.
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USA REAL ESTATE INVESTMENT TRUST
Statements of Income (Loss)
(Unaudited)
Three Months Ended
June 30,
1995 1994
---------- ----------
Revenues:
Rent $ 690,862 $ 750,017
Interest 39,658 86,317
---------- ----------
730,520 836,334
---------- ----------
Expenses:
Operating expenses 83,565 285,733
Property taxes 53,886 46,962
Property management fees 15,000 45,618
Interest 71,534 145,753
Depreciation and amortization 162,070 151,223
General and administative 178,457 205,026
Legal settlement 250,000 0
---------- ----------
814,512 880,315
---------- ----------
Net income (loss) before gain (loss)
on disposition of investments $ (83,992) $ (43,981)
========== ==========
Gain (loss) on disposition of investments 411,254 (250,000)
---------- ----------
Net income (loss) $ 327,262 $ (293,981)
========== ==========
Net income (loss) per share of beneficial interest $ 0.08 $ ( 0.07)
========== ==========
See accompanying notes to financial statements.
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USA REAL ESTATE INVESTMENT TRUST
Statements of Income (Loss)
(Unaudited)
Six Months Ended
June 30,
1995 1994
---------- ----------
Revenues:
Rent $ 1,418,220 $ 1,461,040
Interest 62,337 135,438
---------- ----------
1,480,557 1,596,478
---------- ----------
Expenses:
Operating expenses 163,733 544,271
Property taxes 108,351 114,530
Property management fees 30,000 84,923
Interest 165,421 289,316
Depreciation and amortization 328,790 302,203
General and administrative 372,424 340,233
Legal settlement 250,000 0
---------- ----------
$ 1,418,719 $ 1,675,476
---------- ----------
Net income (loss) before gain (loss)
on disposition of investments 61,838 (78,998)
Gain (loss) on disposition of investments 411,254 (250,000)
---------- ----------
Net income (loss) $ 473,092 $ (328,998)
========== ==========
Net income (loss) per share of beneficial interest $ 0.11 $ (0.08)
========== ==========
See accompanying notes to financial statements.
<PAGE> 6
Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 473,092 (328,998)
---------- ----------
Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 328,790 299,203
Gain on disposition of investment
properties (411,254) 0
Loss on disposition of notes receivable 0 250,000
Changes in other assets and liabilities:
Decrease (increase) in receivables 0 37,484
Decrease (increase) in other assets 65,920 (2,746)
Increase (decrease) in accounts
payable and accrued expenses (47,533) (3,298)
Decrease in lease deposits (4,460) (2,913)
---------- ----------
Total adjustments to income (68,537) 577,730
---------- ----------
Net cash provided by
operating activities 404,555 248,732
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of rental properties 3,799,241 0
Improvements to rental properties (662,917) (56,690)
Collections on notes receivable 71,754 214,960
---------- ----------
Net cash provided by
investing activities 3,208,078 158,270
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of shares (72,760) 0
Principal payments on long-term notes payable (1,051,419) (28,055)
Distributions paid (626,925) (470,025)
---------- ----------
Net cash used by
financing activities (1,750,904) (498,080)
---------- ----------
Net increase (decrease) in cash 1,861,729 (91,078)
Cash and cash equivalents, beginning of period 378,411 1,012,594
---------- ----------
Cash and cash equivalents, end of period $ 2,240,140 $ 921,516
========== ==========
See accompanying notes to financial statements.
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USA REAL ESTATE INVESTMENT TRUST
Notes to Financial Statements
1. In the opinion of the Trust, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly
the Trust's financial position as of June 30, 1995, and the
results of its operations for the six months ended June 30,
1995 and 1994 and cash flows for the six months ended June 30,
1995 and 1994.
The accounting policies followed by the Trust are set forth in
Note 1 to the Trust's financial statements in the 1994 Form 10-K,
which are incorporated herein by reference.
2. In 1987, the Trust elected to be taxed as a real estate investment
trust and, as such, will not be taxed on that portion of its
taxable income which is distributed to shareholders provided that
at least 95% of its real estate investment trust taxable income
is distributed.
The Trust intends to continue to qualify as a real estate
investment trust and, accordingly, no provision for income taxes
has been made in the financial statements.
<PAGE> 8
USA REAL ESTATE INVESTMENT TRUST
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
Rent revenues decreased $59,155 and $42,820 for the three months
and six months ended June 30, 1995, respectively, compared to the
same periods in 1994. This decrease is primarily attributed to
lower occupancy at 1 Scripps in Sacramento, California and the sale
of 1450 Hatch Road in Ceres, California in May, 1995.
Interest revenues decreased $46,659 and $73,101 for the three
months and six months ended June 30, 1995, respectively, compared
to the same periods in 1994, primarily due to the collection of
the $940,000 note receivable collateralized by 151 and 175
Opportunity Street in December, 1994.
Operating expenses decreased $202,168 and $380,538 for the three
months and six months ended June 30, 1995, respectively, compared
to the same periods in 1994. The decrease is primarily due to
the cost to repair uninsured earthquake damage at 19401 Parthenia
Street, in Northridge, California, incurred in 1994. Repairs
related to the earthquake damage were $149,295 and $290,416 for
the three months and six months ended June 30, 1994, respectively.
Interest expense decreased $74,219 and $123,895 for the three
months and six months ended June 30, 1995, respectively, compared
to the same periods in 1994, due to lower outstanding borrowings
and lower interest rates.
Property management decreased $30,618 and $54,923 for the three
months and six months ended June 30, 1995, respectively, compared
to the same periods in 1994, because of the termination of the
former property management agreement and the hiring of a new
property manager who provided similar service at a reduced cost.
The gain on disposition of investments for the three months and
six months ended June 30, 1995, was attributed to the sale of
1450 Hatch Road in Ceres, California in May, 1995.
The loss on disposition of investments for the three months and
six months ended June 30, 1994 was attributed to the payoff of a
note receivable in June, 1994, which had been delinquent since 1991.
CAPITAL RESOURCES AND LIQUIDITY
The Trust anticipates that operating income, proceeds from the sale
of properties, collections on notes receivable, and borrowings
collateralized by specific properties will provide for its future
liquidity and capital resource needs.
<PAGE> 9
PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 5: OTHER INFORMATION:
As previously reported, the Trust has been engaged since November, 1994, in
litigation with its former adviser in four separate lawsuits filed by or
against the Trust, or subject to a claim of indemnity, in the Superior Court
of Sacramento County, California. In June, 1995, pursuant to the approval of
the Trustees of the Trust of a Settlement Agreement and related documents, all
such litigation was settled. Without any admission of wrongdoing by any
party, as the settlement of doubtful and disputed claims, and in order to
avoid the time and expense and hazards of litigation, in consideration for
the one-time payment of $250,000 by the Trust to Jeffrey B. Berger and mutual
full, final complete, and general releases of all claims, known or unknown,
fixed or contingent, by all parties with respect to all other parties and,
where applicable, the officers, directors, trustees, shareholders, employees,
and agents thereof, all litigaton between the Trust and affiliated parties and
the former adviser and affiliated parties was dismissed. In addition, as part
of the Settlement Agreement, the Trust purchased from its former adviser and
affiliated parties at the cash price of $3 per share all shares of the Trust's
outstanding stock which were owned thereby, the number of which shares
amounted to a total of 24,254 shares of the Trust's outstanding stock. Those
shares of stock have now been retired and returned to the category of
authorized but unissued stock. The Trust is not now engaged in litigation in
any court with any party.
On May 15, 1995, the Annual Meeting of the Shareholders of the Trust was held
in Sacramento, California. At said meeting, the shareholders considered and
voted on two matters. First, the four trustees of the Trust who were at that
time serving were renominated and reelected as the trustees of the Trust. The
vote with respect to each trustee was as follows:
Trustee Votes for Votes against Votes abstaining
- ------------------ ----------- --------------- -----------------
Gregory E. Crissman 2,090,009 98,334 0
Benjamin A. Diaz 2,101,387 86,957 0
William M. Gallagher 2,098,264 89,955 0
Joyce A. Marks 2,095,420 92,923 0
In addition to the election of Trustees, the shareholders considered,
approved, and adopted amendments to the Declaration of Trust pursuant to which
(i) all references to an "Adviser" or the former name of the Trust were
deleted from the Declartion of Trust, (ii) Paragraphs 9.5 and 9.6 of the
Declaration were amended to prohibit the Trust from purchasing property from,
selling property to, making loans to, borrowing money from, or investing in
joint ventures or partnerships with any Trustee or any affiliate thereof, and
(iii) Paragraphs 9.1 through 9.4 of the Declaration of Trust were amended to
define better and to limit the obligations of the Trust to indemnify agents
in order to limit and restrict the potential liability of the Trust to
indemnify others. The vote with respect to the resolutions adopting these
amendments was:
Votes for Votes against Votes abstaining
------------- ------------- ----------------
(i) 2,079,881 39,078 13,811
(ii) 2,074,744 37,700 5,457
(iii) 2,077,179 38,912 40
<PAGE> 10
PART II. OTHER INFORMATION
USA REAL ESTATE INVESTMENT TRUST
ITEM 6: REPORTS ON FORM 8-K
None.
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USA REAL ESTATE INVESTMENT TRUST
Signatures
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
USA Real Estate Investment Trust
----------------------------------------
July 15, 1995 Gregory Crissman
-------------------- ----------------------------------------
Date Gregory Crissman
Chairman
July 15, 1995 Benjamin Diaz
-------------------- ----------------------------------------
Date Benjamin Diaz
Trustee
<PAGE> 12
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at June 30, 1995 (Unaudited) and the
Statement of Income for the Six Months Ended March 31, 1995 (Unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,240,140
<SECURITIES> 0
<RECEIVABLES> 68,746
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,308,887
<PP&E> 28,604,707
<DEPRECIATION> 1,962,472
<TOTAL-ASSETS> 24,594,036
<CURRENT-LIABILITIES> 87,521
<BONDS> 0
<COMMON> 4,153,469
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24,594,036
<SALES> 1,480,557
<TOTAL-REVENUES> 1,480,557
<CGS> 0
<TOTAL-COSTS> 1,418,719
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,421
<INCOME-PRETAX> 311,838
<INCOME-TAX> 161,254
<INCOME-CONTINUING> 473,092
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473,092
<EPS-PRIMARY> 0.110
<EPS-DILUTED> 0.110
</TABLE>
